XML 56 R27.htm IDEA: XBRL DOCUMENT v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Domestic and foreign components of Income (loss) before income taxes are shown below:
Years Ended December 31,
In millions202420232022
Domestic$(473.6)$(55.4)$200.0 
Foreign(62.0)45.3 69.6 
Income (loss) before income taxes$(535.6)$(10.1)$269.6 
The provision (benefit) for income taxes consisted of:
Years Ended December 31,
In millions202420232022
Current
Federal$0.9 $25.8 $41.7 
State and local0.9 2.9 6.3 
Foreign14.3 11.3 15.0 
Total current$16.1 $40.0 $63.0 
Deferred
Federal$(101.0)$(39.7)$(4.6)
State and local(16.8)(4.6)(1.7)
Foreign(3.6)(0.4)1.3 
Total deferred$(121.4)$(44.7)$(5.0)
Provision (benefit) for income taxes$(105.3)$(4.7)$58.0 
We recorded $1.3 million, zero, and $4.5 million of deferred tax provision (benefit) expense within components of other comprehensive income during the years ended December 31, 2024, 2023, and 2022, respectively.
The following table summarizes the major differences between taxes computed at the U.S. federal statutory rate and the actual income tax provision attributable to operations:
Years Ended December 31,
In millions, except percentage data202420232022
Federal statutory tax rate$(112.5)$(2.1)$56.6 
State and local income taxes, net of federal benefit(10.3)(1.0)5.6 
Foreign income tax rate differential(2.4)1.7 2.2 
Changes in valuation allowance1.4 1.3 0.1 
Foreign derived intangible income (1.4)(2.4)(5.9)
Officers compensation0.4 0.9 0.6 
Goodwill impairment26.8 — — 
Excess share-based compensation1.0 (1.1)(0.1)
Federal and state tax credits(11.3)(4.2)(4.8)
Legislative tax rate change(0.1)0.5 0.8 
Sustainably sourced feedstock benefit(0.8)(0.7)(1.3)
Uncertain tax positions1.0 0.5 0.5 
Tax on Dividends, Deemed Dividends, and GILTI (1)
1.3 0.5 2.6 
Other1.6 1.4 1.1 
Provision (benefit) for income taxes$(105.3)$(4.7)$58.0 
Effective tax rate19.7 %46.5 %21.5 %
_______________
(1) GILTI is defined as Global Intangible Low Tax Income
The decrease in our effective tax rate from 2023 to 2024 was mainly driven by the mix of earnings, with extensive U.S. losses, primarily due to the Performance Chemicals goodwill impairment (see Note 8) and restructuring activities (see Note 15), driving an overall global loss and tax benefit for the year. Approximately 31% of the goodwill impaired had an impact to the tax rate, offsetting the overall tax benefit. Significant increases in federal and state tax credits further increased the overall tax benefit as compared to prior years.
The increase in our effective tax rate from 2022 to 2023 was mainly driven by the mix of earnings, with U.S. losses, primarily due to the restructuring activities during the year (see Note 15), driving an overall global loss and tax benefit for the year. Furthermore, significant decline in U.S. taxable earnings drove a decrease in the foreign derived intangible income benefit as compared to prior years skewing the effective tax rate.
The significant components of deferred tax assets and liabilities are as follows:
December 31,
In millions20242023
Deferred tax assets:
Employee benefits$15.4 $13.3 
Intangibles (including goodwill)30.5 — 
Net operating losses18.6 10.6 
Inventory11.2 16.9 
Leases15.8 18.7 
Litigation verdict accrual21.4 20.5 
Research and experimental expenses29.9 15.3 
Interest limitation24.5 7.6 
Other21.8 16.3 
Total deferred tax assets$189.1 $119.2 
Valuation allowance(11.0)(11.1)
Total deferred tax assets, net of valuation allowance$178.1 $108.1 
Deferred tax liabilities:
Fixed assets$96.9 $115.9 
Intangibles (including goodwill)— 29.3 
Leases14.6 18.4 
Other4.9 3.8 
Total deferred tax liabilities$116.4 $167.4 
Net deferred tax asset (liability) (1)
$61.7 $(59.3)
_______________
(1) Presentation in the table above is on a gross basis, however, due to jurisdictional netting, our net deferred tax asset and liability recorded on the consolidated balance sheets were $117.9 million and $56.2 million, respectively, as of December 31, 2024, and $11.6 million and $70.9 million, respectively, as of December 31, 2023.
Our net deferred tax liability changed to an overall net deferred tax asset in 2024 compared to 2023, with a total change of $121.0 million. The pre-tax Performance Chemicals reporting unit goodwill impairment charge of $349.1 million (refer to Note 8 for more detail) and additional Performance Chemicals repositioning restructuring spending (refer to Note 15 for more detail) during 2024 resulted in a change from a deferred liability to an asset.
Due to taxable losses in the U.S. in 2024, additional net operating losses were generated, further increasing the deferred tax asset for the year. As part of Tax Cuts and Jobs Act ("TCJA") enacted in December 2017 under Internal Revenue Code ("IRC") Section 174, we were required to capitalize and amortize research and experimental expenditures. This requirement continued to increase the deferred tax asset for 2024. Also, as modified by TCJA, IRC Section 163(j) limits U.S. business interest expense deductions as a function of adjusted taxable income. In 2024 due to overall taxable losses, Ingevity's interest expense deduction was fully limited, increasing the deferred tax asset for 2024.
We have deferred tax assets, including net operating loss and state tax credit carryforwards, which are available to offset future taxable income. A valuation allowance has been provided where management has determined that it is more likely than not that the deferred tax assets will not be realized. In 2024, we recognized tax expense of $1.4 million due to our expected inability to recognize the benefit associated with state tax credits prior to their expiration.
At December 31, 2024, net operating loss carryforwards totaled $64.4 million of which we have recorded deferred tax assets of $18.6 million. Of this total, $0.1 million will expire in 10 years, $0.3 million will expire in 15 years, $0.9 million will expire in 20 years, and $17.3 million will never expire.
Due to the global nature of our operations, a portion of our cash is held outside the U.S. The cash and cash equivalent balance at December 31, 2024 included $63.9 million held by our foreign subsidiaries. At December 31, 2024, 2023, and 2022, no deferred income taxes have been provided for our share of undistributed net earnings of foreign operations due to management’s intent to reinvest such amounts indefinitely. The determination of the amount of taxes that may be due if earnings are remitted is not practicable because such liability, if any, is dependent on circumstances that exist if and when remittance occurs. The circumstances that would affect the calculations include the source location and amount of the distribution, the underlying tax rate already paid on the earnings, foreign withholding taxes, the opportunity to use foreign tax credits, and the potential impact of future tax reform. Positive undistributed earnings considered to be indefinitely reinvested totaled $40.0 million at December 31, 2024.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
Years ended December 31,
In millions202420232022
Balance at beginning of year$1.2 $0.8 $0.3 
Additions for tax positions related to prior years1.2 0.4 0.5 
Reduction for lapse of statute of limitation(0.3)— — 
Balance at end of year (1)
$2.1 $1.2 $0.8 
_______________
(1) Included in "Other liabilities" on the consolidated balance sheets.
As of December 31, 2024, 2023, and 2022, $2.4 million, $1.4 million, and $0.9 million, respectively, of unrecognized tax benefit, including penalties and interest, would, if recognized, impact our effective tax rate. We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense.
Pillar Two, released by the Organisation for Economic Cooperation and Development (OECD), went into effect on January 1, 2024. Pillar Two’s intent is to create a 15% global minimum tax for all jurisdictions in which multinational enterprises operate. To date, thirteen of our reporting jurisdictions have enacted final legislation adopting Pillar Two. While we do not anticipate that this legislation will have a material impact on our tax provision or effective tax rate, we continue to monitor evolving tax legislation in the jurisdictions in which we operate. No tax impacts of Pillar Two were recorded for the year ended December 31, 2024.